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Question: Coiner Clothes is contemplating the replacement of one of its knitting machines with a newer, and more efficient one. The old machine has a book value of $600,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $265,000. The old machine is being depreciated by $120,000 per year, using the straight-line method. The new machine has a purchase price of $1,175,000, an estimated useful life MACRS class life of 5 years, and an estimated salvage value of $145,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The new machines is expected to save on electric power usage, labor and repair costs, as well as to reduce the number of defective articles of clothing. In total, an annual savings of $255,000 will be realized if the new machine is installed. The company's marginal tax rate is 35% and it has a wacc of 12%. Should the firm purchase the new machine? Clearly support your answer.
Caan Corporation will pay a $2.66 per share dividend next year. The company pledges to increase its dividend by 5 percent per year indefinitely.
Explain why a plain vanilla interest swap has no initial value if it is priced at market.
How is the levered value of the project impacted by the constant interest coverage policy?
Balloon Payment Financial (BPF) has an inventory conversion period of 45 days, a receivables collection period of 30 days, and a payables deferral period of 20 days.
A 20-year, 10% coupon bond is currently quoted at $850. Calculate the following: Yield to call, if the bond is called 10 years later at a call price equal.
Bob has $20,000 and want to buy the maximum amount of XYZ Stock's that he can. Hid margin A/C price XYZ is currently $30; the IMR is 45% & MMR is 25%. The broker charges 9% in loan's.
What is the appropriate cost for retained earnings in determining the firm's cost of capital?
Explain what the staff should expect the auditors to do. Be sure to include the requirements of the Sarbanes Oxley Act in your explanation.
You are the head of sales for a relatively small company. You have just received a massive order for parts/supplies/services.
The other alternative is the purchase of a supermarket chain, also costing $100 million. It too, has an expected net present value of $20 million. The firms management is interested in reducing the variability of its earnings.
the recovery rate on credit instruments is defined as one minus the loss rate. the loss rate can be significantly
Assume the following information regarding U.S. and European annualized interest rates: The U.S. leading rate is 6.73%; The U.S. borrowing rate is 7.20%.
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